What the internet of things means for marketers

For marketers, the internet's next phase could be even more vital than the web's inception, writes David Benady.

The prospect of a world where everyday objects – the clothes we wear and even our pets – have sensors embedded in them, so they can communicate with each other, has unleashed an avalanche of amazing innovations. Making sense of this "internet of things" presents a serious challenge for marketers, whose task will be to ensure new developments offer real, life-improving benefits to the public.

[Nike] goes from being just a shoe brand to a socially connected digital fitness service. It is no longer a shoe people buy and take away, it is an ongoing service they subscribe to.

Some believe the internet of things will create an even greater shift for marketing and brands than the internet itself. Andy Hobsbawm, co-founder and chief marketing officer at internet of things software provider Evrythng, says there are 3.3tn consumer products made and sold each year, according to its research. "Imagine the opportunities for marketers if those products start changing the nature of what they do and how they operate, so they are smart and connected," he adds.

Evrythng allows brand owners to process information about connected products to personalise them to each consumer. Hobsbawm describes this as being similar to CRM, but at the level of each individual product, rather than the customer – product relationship marketing (PRM). The company works with Mondelez, Air New Zealand and Diageo, among others. It recently carried out work on Diageo’s whisky brands that enabled purchasers to attach a personalised film tribute on bottles they were giving as Father’s Day gifts. In effect, this turned each bottle into a personalised media opportunity in its own right.

One of the much commented-on examples of PRM is the connected Nike+ FuelBand, but Hobsbawm predicts that many other brands will be able create similar relationships. "[Nike] goes from being just a shoe brand to a socially connected digital fitness service. It is no longer a shoe people buy and take away, it is an ongoing service they subscribe to," he says.

The digital relationship

Once a brand has captured a consumer’s data, it makes it a harder decision for them to change to another product as they risk losing that data in the move – a bit like the potential difficulties in changing bank accounts or switching supermarkets for online shopping. "The more you interact with a product, the more of a direct digital relationship you have with the brand. That is a huge shift in how products work and puts the brands alongside retailers in their relationship with consumers," says Hobsbawm.

Hive ticks the box of being an innovation that can tangibly improve people’s everyday lives, albeit in a small way.

The internet of things is still in its early days, but a pointer to the future is Google’s recent $3.2bn purchase of Nest Labs, which makes intelligent gadgets such as thermostats and smoke alarms. These learn from the way consumers use them, and can programme themselves to take into account the user’s behaviour. The more data that is amassed about the user, the more invaluable the gadgets become, engendering powerful loyalty.

Then there are gimmicky applications such as the Budweiser Red Light, a unit that ice hockey fans can install in their homes, which flashes and emits noises when their team scores. As the Budweiser Canada website puts it: "We are not joking: It’s real, it works and you can buy it." Imagine a pint of beer that bleeps when your football team scores a goal, or offers you a free second pint if they get through to a higher level in a competition.

A mass-market application of the internet of things in the UK is Hive, an app from British Gas that allows householders to control their central heating via their smartphone. Rolled out earlier this year in a blaze of advertising, Hive ticks the box of being an innovation that can tangibly improve people’s everyday lives, albeit in a small way. It gives users the power to heat their homes and get hot water only when they need to, reducing energy waste and saving money. It even offers "Active Frost Protection" to help avoid frozen pipes.

Hive has a clear use and promises to save users up to £150 a year on their energy bill, although at a cost of £199 it requires consumers to look at the long-term savings. Becoming a "heating geek" also seems to be a requirement, as it encourages the user to continually check and adjust their system.

One wonders whether many of the other developments promised by promoters of the internet of things are really so useful to consumers. It should be remembered, though, that many were sceptical about the predicted benefits of the internet in the early years. Just as the internet transformed our economy and turned the discipline of marketing on its head, there are claims that the internet of things will do the same. According to research firm Gartner, by 2020 there will be 26bn connected objects, more than three times the number of smartphones, tablets and PCs.

While the applications are endless, the motives are less clear. For example, telematics sensors embedded in cars, which record how safely people drive, would enable insurers to adjust their premiums accordingly. However, this would serve to fulfil the needs of insurance firms, rather than consumer demand.

Meanwhile, the connectivity of objects raises ethical issues over privacy and access to data. These concerns will be assuaged only by applications that people want and are useful. Otherwise, the internet of things risks ending up like GM food, which has been widely rejected, in part because people did not understand the consumer benefit.

Data-drive

Anil Pillai, chief executive of digital agency DigitasLBi UK, argues that the developments today can be compared to the web in the early 90s. Then, too, there were many predictions about what was likely to happen, but certain conditions had to be achieved before these developments could be unleashed. For the internet of things, the main challenge is establishing universal formats that allow objects to connect with one another.

"It is about learning the lessons from the past 20 years of the internet," says Pillai. "What has made the internet faster and more powerful is that it is all based on open standards – the more browsers and technologies can talk to each other, the faster the take-up. The internet of things faces the same goals: the more open it creates its infrastructure, the faster the take-up."

There are huge "walled gardens" of data, such as the Oyster-card commuter network, Nike’s community of FuelBand-wearing runners or the emerging smart-metered energy networks, but these data sets have not yet been opened up to marketers.

This data could be useful for brands, helping to build rich profiles of user behaviour and to more intelligently manage pricing.

As Tom Hostler, managing partner at digital agency Poke, says: "All those new networks are in ‘learning mode’ right now, gathering their data, trialling their pattern-matching theories and testing consumer acceptance of new data-driven ideas."

He predicts that manufacturers of a new generation of "smart products" will gather this customer data and develop a detailed view of customer habits. They will use this to deliver enhanced services and messages.

"Where it gets exciting is when these devices and networks are joined and the data sets can be combined, overlaid and patterns detected. This creates a new era in smart services and insight-driven marketing," adds Hostler.

He is confident that, once marketers get their hands on the data the internet of things will undoubtedly create, they will be able to find some stunning uses. "As with any magical marketing moment, it will come when consumers wonder ‘How did they do that?’ I think that moment will come from some very clever analysis of seemingly unconnected and unrelated data sets, to deliver an insight about a consumer that wasn’t previously detectable. It’s a fine line between ‘spooky’ and ‘pleasantly surprised’, though," he adds.

One obvious area for investigation will be using the data to tailor pricing. Dynamic pricing could mean that, ultimately, each product reacts to individual consumers, using data on their purchasing or social-media habits to offer them a discount.

As Mark Holden, head of futures at media agency Arena Media UK, says: "Clearly this data could be useful for brands, helping to build rich profiles of user behaviour and to more intelligently manage pricing." However, he warns: "If connected products are to collect data on use, we’ll have to ensure there is a value exchange for users: that we’re using the data to better tailor brand experiences, improve products or reward loyalty."

It will be down to marketers to make the call, according to Neil Dawson, chief strategy officer at integrated agency Sapient­Nitro. "The role of marketers is to put people first and technology second. The big buzzword is utility: will the innovation make my life easier, give me control or help me save the planet?"

They say that half of the predicted future never happens. But if only half of what is promised by the internet of things comes to pass, in the future we will be healthier, safer and more in control of our surroundings than ever.

Probability gets quantified

Josh McBain, account director, Future Foundation

"Ever since the data revolution began to emerge, businesses and governments have raced to take advantage of the benefits that the collection and analysis of information can offer. Although slower off the mark, consumers have also begun to use newly available data-collection software, programmes and devices to capture personal intelligence. From potentially life-changing health-monitoring and finance-management apps, to the more baffling "smart fork" and nappy-tracker devices, the range of everyday activities we can now collect information on is staggering.

This has resulted in a trend known as The Quantified Self: the self-monitoring of real-time information to streamline, optimise and enhance the management of our lives. And yet, while there is some evidence that this is beginning to take off, it is notable that such a widely discussed trend has translated into very limited real behavioural change at a consumer level.

Take health-tracking apps as an example: although the number of users has doubled since 2010, only 8% of people in the UK use these devices today. What’s more, when we asked consumers about the full range of monitoring devices they used, the most significant finding was that three-quarters of people don’t use collection devices at all. Something must be applying the handbrake to the advancement of this trend.

From health-monitoring apps to nappy-trackers, the range of everyday activities we can now collect information on is staggering.

Our analysis suggests that the main obstacle has been the utility of these devices – how much they can truly claim to offer personal insights on a level that allows us to significantly alter our behaviour for the better. Limitations have been due to two interconnected flaws: the extent to which current devices collect data in isolation, and the limited ability these devices have to offer predictive guidance.

It is often said that siloed data is useless data, and although this is an exaggeration, it is certainly true that to get the most out of the personal intelligence we collect, future devices will have to allow greater integration with other sources of data-collection to provide a more complete analysis of how we live. With a more joined-up approach, future platforms will be in a better position to predict consumer behaviour and offer holistic advice on how we can improve our lives — not only today, but also in the weeks, months and years ahead.

Such devices are emerging. One of the best examples is RevUp!, a platform from MD Revolution that was unveiled at this year’s CES trade show in Las Vegas. The system helps users make sense of their health data by integrating information, from lab results to genetic tests, in order to deliver tailored health plans. What’s more, this tool can be synced to other apps or tools such as diet trackers, pedometers and sleep monitors. RevUp! is able to use predictive intelligence to suggest preventative health measures.

It is the emergence of such devices that provides a convincing model for how The Quantified Self is likely to develop toward a more integrated approach to personal-data collection. If correct, we are likely to witness a concomitant and rapid expansion in the use of these devices."

Data and privacy implications for brands

Oli Shaw, service design lead, Fjord, part of Accenture Interactive

"Our relationship with technology is in the midst of a huge transition. The more connected everyday objects and places become, and the more we use ‘smart’ services, the more our relationships with brands move into uncharted territory.

Many more aspects of our lives are becoming connected and smart already. While we may laugh at the oft-predicted ‘smart fridge’ of the future that knows when we need more milk, the connected home is gaining momentum.

Perhaps even more interesting examples are developments outside the home, such as the growth of ‘living services’ that can respond in real time to changes in behaviour. We are interacting with these on a daily basis: congestion charge cameras that scan vehicle number plates, and the screens at Tesco fuel stations that tailor ads to each user.

What does this mean for brands and consumers? Consumer awareness that inanimate objects and disconnected services are becoming interactive and web-connected is increasing — people are becoming aware that we live in a society where almost every aspect of our lives is monitored and managed by devices that surround us.

We live in a society where almost every aspect of our lives is monitored and managed by devices that surround us.

Many will not like this, and fear a loss of control over their lives and privacy. For brands, the biggest challenge will be to introduce connected services in a way that is reassuring and beneficial, rather than scary, but also in a way that will allow consumers to be in control.

Showing consumers what is known about them and allowing them to control their personal data will become a vital aspect of brands and services, not just because of concerns about privacy, but also because a growing number of consumers will wake up to the fact their data is valuable and can be traded with brands in return for tailored offers and incentives.

Trust will emerge as the key measurement of success for brands that venture into these uncharted territories. When a consumer’s data is retained by a business, the consumer needs to know the brand will protect it. When a consumer is using a ‘living’ service, packed with complexity and crossing the boundaries of home and public life, they need to trust that it is making the right decisions on their behalf."

Connecting food consumption

Emma Marsh, head of Love Food Hate Waste

"Technology opens up huge opportunities in terms of innovative ways of monitoring and reducing waste, as well as offering more engaging tools to aid and encourage waste-reduction.

People think of waste management as relating only to disposal, but that’s not when food is wasted. It’s about behaviours relating to shopping, portioning, date labels, storage and recipes, not to mention attitudes, habits and motivations. We are trying to tackle these behaviours and make new ones easy to adopt.

There is a variety of ways to provide the information people need when they are shopping, cooking and thinking about meals. The Love Food Hate Waste website is mobile-enabled, and there is a Twitter account – @LFHW_UK – and a Facebook community.

Our free app has concise and engaging information that people can use to prevent food waste. Users can enter details of food and the app will present recipes that can be cooked using those ingredients. It creates a shopping list so the user knows what extra items they need, and will even let you know what portion sizes should be for the number of people being served.

The next stage is to make this more connected and automated, and less reliant on manual input. We’re talking with white-goods manufacturers about connecting what’s in the fridge with going shopping. It might tell you that you have a ready meal close to its expiry date. This could be automated, hopefully in a matter of months. The manufacturers are very receptive to this.

Awareness is at its highest level to date: 56% of consumers say they are very aware that food waste is an issue, and there is a willingness to act. So we need different solutions available in different ways for different people. It’s all about making it easy."

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